The example of automobile industry has being used in order to explain and expose the theory of the firm comparing both, the Japanese (J-firm) and the American companies (A-firm). Trough the analysis of how do they operate and how do Japanese firms had improve in such way that some occidental companies had to adapt and change not only on their internal processes but also on their external organization when suppliers are an important role base on competences and on the rapid change of technologies.
The various authors who have studied these organizational changes to externally indicate a vertically reorganization characterized by outsourcing which means replacing part of a production cycle and divide those that previously operated internally. This changes are normally called a “vertical disintegration” which means that the replaced part is accompanied by a new relationship with suppliers, modifying the traditional competitive approach in the short term, a new kind of relationship characterized by stability and permanence, reducing in a way the “opportunistic problem” mention by Williamson on his theory, where normally even if there is a contract, in this case with a supplier, there will be also some chances of getting problems based on their behavior.
First, the theory of transaction costs by Williamson, explains the type of vertical relationship chosen by the company, market or hierarchy, depending on the degree of specificity of the assets involved in the transaction: as it increases so does dependence between the parties, appearing the retention problem and, consequently, the risk of opportunistic behavior: after a critical level of asset specificity the company integrated into its internal organization the transaction.
Second, the difference between the A-firm and J-firm are predominately in the three aspects: Human resources as of labor relations, corporate financial structure and industrial organization.
A-firm, when decision-making concerning to a high...